Question

Write a 1-2 page (approximately 500 words) paper on : DISNEY COMPANY

• Part A-Fundamental Valuation:
  1. Estimate a growth rate for your firm's Dividends per Share.
  2. Assume a 12.5% discount rate.
  3. Calculate an estimated value of a share of the stock using the constant-growth model (Eq. 8-6 in the textbook), also known as the Gordon growth model.
  4. Compare and contrast your valuation results with the current share price in the market.
  5. Respond to this question: What changes in the variables would be necessary in your valuation to best approximate the market valuation?
• Part B - Relative Valuation:
  1. Estimate a growth rate for your firm's Earnings per Share (EPS).
  2. Determine an applicable Price-Earnings (P/E) ratio for your firm in 5 years.
  3. Calculate an estimated value of a share of the stock in 5 years using the P/E ratio model (Eq. 8-10 in the textbook).
  4. Respond to this question: Would you characterize your stock as undervalued or overvalued? Explain.
  5. Respond to this question: Based on your valuations in parts A and B, would you invest in this stock? Explain.

Answer 1

	using five year model
Estimate a growth rate for your firm's Dividends per Share.
	2014	2019	Rate
Dividend payout	1.09	1.71	11.38%
Calculate an estimated value of a share of the stock using the constant-growth model (Eq. 8-6 in the textbook), also known as the Gordon growth model.
Now discount rate,	12.50%
Compare and contrast your valuation results with the current share price in the market.
estimated value of a share	1.71/(.125-.1138)	$    152.68
Current share price, 29-mar-2019	111.03
looking at this, it seems the stock is under priced as per Gordon Growth Model
Respond to this question: What changes in the variables would be necessary in your valuation to best approximate the market valuation?
If we need our calculate valuation to be very close to the market rate, then we need to consider
variable growth model. So we should consider- fluctuation in prices, market fundamental, new products added in
Disney's portfolio, etc.
Estimate a growth rate for your firm's Earnings per Share (EPS).
	30.09.2018	30.09.2017	30.09.2016	30.09.2015	30.09.2014
EPS	8.36	5.69	5.73	4.9	4.26
growth rate for four years	19.25%
Price /earning ratio	13.88	16.92	15.62	19.79	19.52
Estimated share value using P/E model, = PE ratio*EPS	116.0368	96.2748	89.5026	96.971	83.1552
Actual stock price	116.94	98.57	92.86	102.2	89.03
Looking at the above results, I believe our stock is over valued as actual prices are more then calculated price
Looking at the investment opportunity and considering the growth rate too. I will invest in stock as its growth looks good considering investment.